rb
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Posts posted by rb
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I watch Shark Tank regularly.
I believe such innovativeness and enterpreneurship is very important for not only employment generation but new and innovative products or services to be introduced in market.
Now we are telling these investors and enterpreneurs that there will be 28% tax on profit and 44.3% long term capital gains when they cash out, in a situation the failure rate in a start up is very high.
28+44.3 = 72.3%. Will there be anything left for inheritance with this type of taxes on startups?
Do you think highly driven people will let their money sit in a savings account and let inflation dwindle their relative wealth away because they're paying more in taxes?
9 out of 10 startups fail (source: Startup Genome - the 2019 report claims 11 out of 12 fail).
7.5 out of 10 venture-backed startups fail (source: Shikhar Ghosh).
2 out of 10 new businesses fail in the first year of operations (source: Bureau of Labor).
https://www.failory.com/blog/startup-failure-rate
If a person such as in Shark Tank invests in 10 companies and looses in 9 companies and then the successful company, you pay 28% corporate tax + 44.3% capital gains (total 72.3%), it might be better to just invest that money in Berkshire or mutual fund and go and work.
It is the start ups that really come up with new ideas and innovative products/services and it might not be the investor/enterpreneur who is loosing but it is the society.
Wouldn't the person be taxed the same regardless if they invested in the start up, Berkshire or the fund?
No..for successful product, I get the money as capital gains in one year or short period - may be after 20 years of effort after selling it to may be a Buffett. Take for example, you have land and that land appreciated considerably and when you sell, that year you make a lot and get into 1 million, while if you work, you may be making 200K over 20 years - lot more money but spread out over longer period.
For berkshire or mutual fund (even better if I put it in 401k or IRA), I dont have to cash it at once.
Any reason why your company can't be owned by an offshore trust which then sprinkles the money to you @990k per year?
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I watch Shark Tank regularly.
I believe such innovativeness and enterpreneurship is very important for not only employment generation but new and innovative products or services to be introduced in market.
Now we are telling these investors and enterpreneurs that there will be 28% tax on profit and 44.3% long term capital gains when they cash out, in a situation the failure rate in a start up is very high.
28+44.3 = 72.3%. Will there be anything left for inheritance with this type of taxes on startups?
Do you think highly driven people will let their money sit in a savings account and let inflation dwindle their relative wealth away because they're paying more in taxes?
9 out of 10 startups fail (source: Startup Genome - the 2019 report claims 11 out of 12 fail).
7.5 out of 10 venture-backed startups fail (source: Shikhar Ghosh).
2 out of 10 new businesses fail in the first year of operations (source: Bureau of Labor).
https://www.failory.com/blog/startup-failure-rate
If a person such as in Shark Tank invests in 10 companies and looses in 9 companies and then the successful company, you pay 28% corporate tax + 44.3% capital gains (total 72.3%), it might be better to just invest that money in Berkshire or mutual fund and go and work.
It is the start ups that really come up with new ideas and innovative products/services and it might not be the investor/enterpreneur who is loosing but it is the society.
Are you aware that you don't know how to calculate taxes? 28%+44.3% does not equal 72.3% as you keep saying.
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I was looking at various covid tracker sites and have yet to find one that counts the number of small business fatalities, or the ones in critical condition.
While the broad rhetoric of this post doesn't make much sense to me, this is a fantastic idea. Does anyone know if there's some way to get something like "excess business deaths"? That would certainly be a useful data point.
I'm guessing it might not be possible because when businesses die, there's not nearly the same amount of rigor involved in documenting that bankruptcy as we would with a human death. Maybe we can get approximate numbers at the end of 2021 based on 2020 tax filings? Any other ideas or anything I'm missing?
I would say that it would be pretty hard to do that independently in North America where a lot of the company information is private. One way to do part of it I guess it's through the number of bankruptcy fillings. Though that will miss the companies that shut down and wind up voluntarily.
It would be much easier to do in countries with a "companies house" where you can find data on all companies even if that data has a big time lag.
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I'm not saying that it's not possible. I'm just saying that the empirical evidence is lacking.
Stay classy my friend.
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Why not tax income less and establish a flat tax on consumption? The issue with income tax is it's difficult to balance incentives to earn more. I think inflation is also more detrimental with high income tax because you can't exactly scale back how much you're paying. But if tax were primarily consumption based well you can scale back. I just think this idea of creating a class warfare on the rich is misguided and ignorant of history. This hasn't ever worked long term and basically destroys incentives long term all for some short term relief?
They discourage consumption.
So what? Here we are in an environment where nobody has any savings and we have to pump trillions of dollars in stimulus money into the economy to keep everything moving forward. Maybe it's simplistic, but allowing people to save more and spend as they see fit is not in and of itself a bad thing no?
So what?
First of all it's not true that nobody has any savings. There are tons of savings. It's the poor people that have no savings. And yes there's a lot of them.
Second, you are aware that consumption=production right. Lowering GDP hasn't been very good for prosperity or stimulating economic activity... historically speaking.
Third, you want to incentivize poor people to increase their savings by hiking their tax bill?
This has got to be one of the worst arguments I've ever heard.
I'm not saying tax the poor more and I'm not saying lower GDP. But you seem to be coming from the angel that GDP is all that matters. I think there is more to it than that. I don't believe higher taxes on the rich solve issues long term. It's a temporary stimulus in an of itself. I think deregulation, shrinking of govt and govt spending and allowing individuals to keep more of what they earn in general is the best way forward.
Sorry but that's exactly when you're saying when you're talking about regressive taxes to encourage saving among the poor. You pretending it's not so doesn't change it.
The whole shrink the government so that people can keep more is also pretty much bullshit. Most of the government spending is on healthcare, education and military. Those aren't discretionary items. People will have to consume those. In order for the people to keep more of what they earn the private sector will have to provide those goods cheaper. Out of those 3 (2 really) which one does the private sector offer at a lower price?
Arguably both healthcare, education
Consumption tax is regressive if you view it plainly as you do. There are many ways to structure a consumption tax that even has attributes of a progressive tax while still allowing this to be mostly volunteer. Canada has done quite a few studies on this in the mid 2000's and the results were positive. There is more than one way to skin a cat. The straight up progressive tax bracket has been anything but perfect here in the US.
https://ideas.repec.org/p/sek/iacpro/5808138.html
I also prefer a Negative Income Tax structure as well.
Yeah. That's bullshit on the education and healthcare.
The paper that you've posted here is. Not really a paper or a study. It pretends to be a paper but it's really more like a deck for a conference. It was written by some political prof at Mount Royal junior high and it's clear that he doesn't know what a regressive tax is. It employs a series of other fallacies as well to try to make its "thesis".
At this point it's pretty clear that you're not dealing in facts here. This from someone who didn't want to make it political.
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Why not tax income less and establish a flat tax on consumption? The issue with income tax is it's difficult to balance incentives to earn more. I think inflation is also more detrimental with high income tax because you can't exactly scale back how much you're paying. But if tax were primarily consumption based well you can scale back. I just think this idea of creating a class warfare on the rich is misguided and ignorant of history. This hasn't ever worked long term and basically destroys incentives long term all for some short term relief?
They discourage consumption.
So what? Here we are in an environment where nobody has any savings and we have to pump trillions of dollars in stimulus money into the economy to keep everything moving forward. Maybe it's simplistic, but allowing people to save more and spend as they see fit is not in and of itself a bad thing no?
So what?
First of all it's not true that nobody has any savings. There are tons of savings. It's the poor people that have no savings. And yes there's a lot of them.
Second, you are aware that consumption=production right. Lowering GDP hasn't been very good for prosperity or stimulating economic activity... historically speaking.
Third, you want to incentivize poor people to increase their savings by hiking their tax bill?
This has got to be one of the worst arguments I've ever heard.
I'm not saying tax the poor more and I'm not saying lower GDP. But you seem to be coming from the angel that GDP is all that matters. I think there is more to it than that. I don't believe higher taxes on the rich solve issues long term. It's a temporary stimulus in an of itself. I think deregulation, shrinking of govt and govt spending and allowing individuals to keep more of what they earn in general is the best way forward.
Sorry but that's exactly when you're saying when you're talking about regressive taxes to encourage saving among the poor. You pretending it's not so doesn't change it.
The whole shrink the government so that people can keep more is also pretty much bullshit. Most of the government spending is on healthcare, education and military. Those aren't discretionary items. People will have to consume those. In order for the people to keep more of what they earn the private sector will have to provide those goods cheaper. Out of those 3 (2 really) which one does the private sector offer at a lower price?
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MO. I can't help it if they give it away for next to nothing.
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Yeehah!
Sold all puts at a nice profit.
However, what to buy now to hedge? Maybe that Einhorn is right and bubble is finally deflating?
Some charts are starting to look real ugly with breakdowns and valuation remain high while Democrats are talking about tax hikes.
Whatever you think politically this cannot be considered an earnings accelerator but, brakes.
Problem with puts is price due to high VIX.
I need to revisit Monday as I would not be surprised to see market rebound. We are more into complacency phase as Einhorn puts it vs panic.
Cardboard
If that's what you're worried about why QQQ? I would be more worries about the SPX than QQQ.
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Why not tax income less and establish a flat tax on consumption? The issue with income tax is it's difficult to balance incentives to earn more. I think inflation is also more detrimental with high income tax because you can't exactly scale back how much you're paying. But if tax were primarily consumption based well you can scale back. I just think this idea of creating a class warfare on the rich is misguided and ignorant of history. This hasn't ever worked long term and basically destroys incentives long term all for some short term relief?
They discourage consumption.
So what? Here we are in an environment where nobody has any savings and we have to pump trillions of dollars in stimulus money into the economy to keep everything moving forward. Maybe it's simplistic, but allowing people to save more and spend as they see fit is not in and of itself a bad thing no?
So what?
First of all it's not true that nobody has any savings. There are tons of savings. It's the poor people that have no savings. And yes there's a lot of them.
Second, you are aware that consumption=production right. Lowering GDP hasn't been very good for prosperity or stimulating economic activity... historically speaking.
Third, you want to incentivize poor people to increase their savings by hiking their tax bill?
This has got to be one of the worst arguments I've ever heard.
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Why not tax income less and establish a flat tax on consumption? The issue with income tax is it's difficult to balance incentives to earn more. I think inflation is also more detrimental with high income tax because you can't exactly scale back how much you're paying. But if tax were primarily consumption based well you can scale back. I just think this idea of creating a class warfare on the rich is misguided and ignorant of history. This hasn't ever worked long term and basically destroys incentives long term all for some short term relief?
It's been discussed many times. High flat consumption taxes are a bad idea because they are regressive and because they discourage consumption.
This thing with a class warfare on the rich is nonsense as well. The argument that the rich should pay less and the poor more (like your consumption tax example) is in itself class warfare - against the poor. Only they don't have lobbyists and publicists. Also it's highly misguided and ignorant of history. As that historically hasn't worked well and in some cases produced some truly catastrophic results.
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Where do we draw the fairness threshold?
If an immigrant family toils to build a dry cleaning business/hotel/apartment worth $2 million, is it fair for that to be taxed at 50%+ at death?
If my grandpa sat on Gillette stock for 70 years and has a 100+ bags of P&G that he wants to put in an educational trust for my future kids,what tax rate should apply at death? (This is a real life example lol)
Should the rate be different because the immigrant worked harder and had a harder life than my grandpa? (This is objectively true) Or because the dry cleaning business is a “real
Family business” whereas clipping divvies from tide pods and 10 bladed razors is not?
What amount of dry cleaner/P&G is it fair to inherit? $500K, $1mm, $2mm? $10mm? Does it change if the money is to be spent on a Ferrari vs education?
I think we need higher rates from a fiscal standpoint, but think that death duties at rates which amount to seizure are antithetical to the bedrock of capitalism and freedom: property rights.
Well the whole rationale for having lower rates for capital is to stimulate economic activity. That means new real means of production. So from that perspective dry cleaning would qualify and clipping divvies would not.
As for inheritance taxation I would say that duties that amount to seizure are not the way to go. But I also don't think anyone is talking about that. I do think that income shouldn't be sheltered forever and has to be taxed at some point. Personally I like Canada's system where there is no estate tax but you have a deemed disposition on death. But even that system could use some improvement especially when it comes to IRAs.
Income is taxed when you earn it....
Well you're gonna have to earn your capital gains at some point.
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Where do we draw the fairness threshold?
If an immigrant family toils to build a dry cleaning business/hotel/apartment worth $2 million, is it fair for that to be taxed at 50%+ at death?
If my grandpa sat on Gillette stock for 70 years and has a 100+ bags of P&G that he wants to put in an educational trust for my future kids,what tax rate should apply at death? (This is a real life example lol)
Should the rate be different because the immigrant worked harder and had a harder life than my grandpa? (This is objectively true) Or because the dry cleaning business is a “real
Family business” whereas clipping divvies from tide pods and 10 bladed razors is not?
What amount of dry cleaner/P&G is it fair to inherit? $500K, $1mm, $2mm? $10mm? Does it change if the money is to be spent on a Ferrari vs education?
I think we need higher rates from a fiscal standpoint, but think that death duties at rates which amount to seizure are antithetical to the bedrock of capitalism and freedom: property rights.
Well the whole rationale for having lower rates for capital is to stimulate economic activity. That means new real means of production. So from that perspective dry cleaning would qualify and clipping divvies would not.
As for inheritance taxation I would say that duties that amount to seizure are not the way to go. But I also don't think anyone is talking about that. I do think that income shouldn't be sheltered forever and has to be taxed at some point. Personally I like Canada's system where there is no estate tax but you have a deemed disposition on death. But even that system could use some improvement especially when it comes to IRAs.
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You can't tax your way into prosperity.
"When Congress votes for all sorts of benefits, without voting for enough taxes to pay for them, they get the support of those who have been promised the benefits, without getting grief from the taxpayers. It's strictly win-win as far as the welfare-state politicians are concerned. But it is strictly lose-lose, big-time, for the country, as deficits skyrocket."
Thomas Sowell
If wealth is concentrated in a few at the top. Is your country really prosperous?
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I see INTC as more analogous to IBM than AAPL. Divesting some of their traditional business while trying to focus on the new up-and-coming business (datacenters for INTC, cloud/AI for IBM). The problem is that INTC does not really have a strong advantage in the new business, much like IBM. Also, the moat is eroding much like IBM. I'd be careful.
I don't think I would go there. INTC doesn't have an advantage in datacenter? INTC basically owns datacenter.
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Spec, what are your feelings these days about HII and GD? They got beat up pretty good since we last talked about them.
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Small position in Netapp (NTAP). Still thinking about INTC, but haven't pulled the trigger yet.
rb summed up the Intel situation without actually talking about Intel. Somewhere in the Apple thread he said something along these lines. "It's a massive company, with generally solid products and a sticky business that is trading below 10x FCF. So I backed up the truck."
Sure, situation isn't apples to apples, and I don't want to speak for rb. But Intel is a massive company that produces competitive products and has solid entrenchment in multiple markets. As Spek said, the latest earnings report was actually pretty good. People love doom and gloom stories. Especially in the tech space. Apple wasn't going out of business and I highly doubt Intel will be out of business anytime soon.
Agreed. I just think that we haven't reached the point of peak-pessimism yet, like AAPL in 2013.
I was thinking that about AAPL in Dec 2018 not 2013.
Now to be fair with you guys I don't have the same level of confidence in INTC as I did in AAPL or MSFT. I think AAPL and MSFT are way more straight forwards businesses so it's easier to make that call. But that may be because there's some tech stuff about micro conductors that I don't understand and not the company's fault. Historically speaking though when it has fallen behind Intel has ruthlessly caught up and then some. They did not care if they incarnated a mountain of money (i.e. one years earnings) but they did it.
On the personal side as someone that has owned AMD products I will say this: I will never buy an AMD product ever again in my life. Every time I had an AMD product there was
a problem with it. Never had a problem with an Intel product. Maybe things have changed at AMD but I don't care. I don't need the aggravation. When you have problem with a monitor it's clear you have a problem with the monitor. You chuck it out and get a new one. When you have a problem with a CPU you don't know you have a problem with the CPU you just get frustrated by a whole of a lot of stuff that happens to you.
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EQR, REI.UN-T. I'm with pupil!
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Wow! This thing looks like a slasher film today.
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rb, pardon too personal question: IIRC you're outside US. How the heck you have 401(k)? Were/are you working in US position while being outside US? Or are you asking for a client/friend?
I'm asking not just out of curiosity but also since this may affect your conversions into Roth/etc. IIRC US accounts and non-US accounts and taxes can get way complicated really fast.
Feel free not to answer though. 8)
Yes. Among other things I had a position with a company in the US while also not being in the US. And yes, I am well aware of how complicated the international tax stuff gets. Right now I file taxes in 3 damn jurisdictions.
I was just slightly concerned about this 401k rollover as I've never been in this position before and I'm not as familiar as the locals for which I assume this is a fairly basic subject. We just don't have the 401k vs IRA distinction in Canada. So I thought it prudent to reach out to my CoBF brethren.
Got it. I believe you got correct information from this thread. You are possibly at higher risk of audit and therefore backdoor Roth conversion - though legal - might be another risk factor. Also, as currently-not-in-US-person, you most likely cannot rollover work 401(k) into individual (self-employed) 401(k) that has advantages in certain situations (including backdoor Roth). So forget last sentence. And good luck.
OT: I was looking at investing abroad (outside US) into startups and hedge funds. During that I ran into the long threads about taxation and in particular US and Canadian RRSP entanglements. Not for faint hearted apparently.
LOL, no it's not for the faint hearted. Thankfully international taxation is a specialty of mine so I'm quite comfortable with the issues involved. In fact I prefer it to be messy and complicated. Otherwise I imagine that the associated fees wouldn't be as generous as they are ;D. Still for the life of me I can't fathom what foreign investing in hedge funds and startups have to do with RRSPs.
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If you're happy with the investment choices in this 401k and the company doesn't force you to rollover, you can choose to let the account stay in the plan. You just can't contribute additional funds to it.
I still have an old 401k from a place where I worked like 10 years ago. Their funds have super low expenses so I use it part of my "passive" allocation. The returns there are similar to my active side despite spending so much more hours on the active side. ::)
*smh at myself*
Yeah i know. But I'm not crazy about it. Pretty much an average plan at Wells Fargo. I only did it to collect the company contributions. Also since I'm an investment manager I should probably do it myself. You either eat you own damn dog food or find something else to do.
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rb, pardon too personal question: IIRC you're outside US. How the heck you have 401(k)? Were/are you working in US position while being outside US? Or are you asking for a client/friend?
I'm asking not just out of curiosity but also since this may affect your conversions into Roth/etc. IIRC US accounts and non-US accounts and taxes can get way complicated really fast.
Feel free not to answer though. 8)
Yes. Among other things I had a position with a company in the US while also not being in the US. And yes, I am well aware of how complicated the international tax stuff gets. Right now I file taxes in 3 damn jurisdictions.
I was just slightly concerned about this 401k rollover as I've never been in this position before and I'm not as familiar as the locals for which I assume this is a fairly basic subject. We just don't have the 401k vs IRA distinction in Canada. So I thought it prudent to reach out to my CoBF brethren.
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thanks tede I'll have to look at this back door strategy.
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If you don't already have a pre-tax IRA, establishing one via a rollover will limit your ability to execute a back-door Roth conversion strategy due to the pro-rata rule. If you don't care about making Roth contributions via a non-deductible IRA, this won't be an issue for you.
Not allowed to have a Roth IRA so it doesn't matter.
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Yeah, all the contributions are 100% vested and the account only has 2 mutual funds in it, nothing esoteric. The plan is to do a direct rollover to a newly opened IRA at IB so they can just send the cash into it and not have to worry about cheques and other nonsense like that.
43.4% tax rate on long term capital gains for high income individuals-Biden plan
in General Discussion
Posted
Basic math is hard!